Our sponsors provide financial support for this website. We endeavour to give our sponsors the opportunity to communicate their messages in placements that are clearly demarcated. Such placements are clearly labelled as Advertisement, Advertisement feature, Sponsored content, Sponsor's perspective, "Brought to you by" the sponsor or words to that effect. Occasionally, we group together content from various sources relating to the same topic. In cases where content from The Economist Group is included, it will be clearly labelled as from The Economist or Economist Intelligence Unit. At all times there is a clear division between our editorial staff and sponsors, and sponsors are never allowed to influence what our editorial teams write. Sponsors are solely responsible for their content, and their views do not necessarily reflect those of The Economist. x

Automakers at a crossroads

As a struggle looms between incumbents and autonomous carmakers (think Google), automakers are reconsidering their future expansion needs

In a global, connected economy, many business variables are negotiable. Geography isn’t one of them.

So, when Subaru was looking to expand its operations and open its first assembly plant outside Japan, the fact that Indiana has six interstates running throughout the state sealed the deal. “Indiana’s central location is pretty much ideal for distribution of automobiles,” says Tom Easterday, Subaru of Indiana’s senior executive vice president.

That access is one reason that Indiana has become the number-two state for auto production, by GDP, in the US, according to the U.S. Bureau of Economic Analysis. (Michigan is number one.)

Now, however, the automotive industry has come to a crossroads of another sort. Internet-based technology and self-driving capability are threatening to disrupt transportation as we know it. Google, Apple, Tesla and Uber are poised to become major players. At the same time, technologies like robotics, additive manufacturing and Internet-connected sensors are changing the way cars are being made.

As incumbent automakers cautiously cross into the self-driving space and race to catch up to the likes of Uber and Google, companies are sharpening their focus on attracting top talent. A recent study, “American Business Expansion to 2020”, conducted by the Economist Intelligence Unit (EIU) and sponsored by the Indiana Economic Development Corporation, found that automotive executives are most motivated by increasing access to skilled labour and by reducing costs (both 66%) when making relocation and expansion decisions.

Technology may be at the heart of transformation in the automotive industry, but that’s not to say that skilled labour will be exported from places like Silicon Valley. “The automotive industry is evolving rapidly, particularly on the technological front,” says Norm Bafunno, president of Toyota Indiana. “Education is already playing a significant role in both preparing the workforce for these new challenges and in researching the systems that will make up our future mobility systems. Indiana is home to many highly respected universities that offer the training and research needed for the mobility of the future.”

Jason Wetzel, state government relations regional manager for General Motors, says the talent pool in Indiana is a primary reason why the auto manufacturer continues to make investments in the facilities it has in the state. “Indiana affords us a great place to build and sell cars with a skilled workforce, solid supply base and an extensive network of dealer partners,” he says. “GM has invested more than $1.9bn in Indiana manufacturing facilities since 2009, which translates to more than 3,900 jobs created or retained, including adding a third shift at Fort Wayne Assembly and upgrading other Indiana facilities.”

“The huge automotive supplier base here makes Indiana an attractive location for growth in our industry,” echoes Mr Bafunno. To ensure continued access to the specific skilled labour the company needs moving forward, Toyota Indiana proactively partnered with Vincennes University to run an advanced manufacturing technician programme. Students earn a wage while attending the two-year programme and combine classwork with real-world experience at the Toyota facility. To build the cars and trucks of the future, “we need a talented workforce to deploy advanced manufacturing techniques and to maintain the advanced machinery they use, says Mr Bafunno. Through this partnership, Toyota has hired 19 team members and enrolled 18 new members last June.

Wheels of change

Vincennes University isn’t alone. Other Indiana universities are looking to the impending needs of the automotive industry. For instance, Purdue University’s brand new Indiana Manufacturing Institute (IMI) is focused on two initiatives integral to the future: additive manufacturing and composite materials.

The former can be used to quickly and cheaply produce parts and prototypes. R. Byron Pipes, a professor at Purdue and director of the IMI, says that moulds that used to take months to make can now be produced in less than a week with 3D printing. “You’ve got the ability to turn around new designs in a really short time,” he notes.

Composite materials made from carbon fibres, meanwhile, will likely see more widespread use in coming years. Since such materials are lighter than traditional metal, steel and aluminium, they would make cars and trucks more fuel-efficient, a process known as lightweighting. Although only a small number of autos (including most race cars at the Indianapolis 500) feature carbon fibre now, Mr Pipes says he’s in discussions with Tesla about using the material instead of aluminium. “We could save them half the weight,” he says.

One innovation that is transforming modern factories is robotics, notes Subaru’s Mr Easterday, who has watched the evolution of automaking for three decades. Robots now do most of the welding and painting, he says, but there are more engineers and inspectors than 10 or 20 years ago—jobs that require specialised training.

Subaru has a branch campus at Purdue and also looks to Ivy Tech community college in Lafayette as a feeder school for new employees, says Mr Easterday.

Indiana’s location originally drew automakers like Subaru, and further improvements like the completion of Interstate 69 and construction of an I-69 Ohio River bridge have further enhanced or will enhance the state’s access, notes Toyota’s Mr Bafunno. So, while technological innovations will continue to transform automaking, the geography of where cars are made in America may not change much at all.